Edge Perspectives

Edge Capital publishes research on subjects covering asset allocation strategies, thought leading perspectives on market events, and new investment opportunities for our clients. Our research reports are designed to enhance knowledge and understanding of the markets and to provide a macro outlook. Please feel free to reach out via email at research@edgecappartners.com to discuss any of the views presented here.

This time is different. Four little words that are often the most dangerous in finance. Though the same can be applied when thinking about generational change. The so-called Millennials were said to be different than their parents. The group of people currently aged between 18 and 34 years old are not materialistic like their mothers and fathers.

Money is defined by its purpose. Money acts as a unit of account (it can be counted), a medium of exchange (it is accepted in trade for goods and services), and a store of value (what it will trade for stays stable). Nothing says that money must be backed by a sovereign promise like the paper currencies we think of as “real” money today (US Dollar, British Pound, Japanese Yen and so forth).

There is an eerie quiet in the market. Domestic politics in the US continues to flail on healthcare much less being able to start tax reform and faces a possible government shutdown and a debt ceiling. Meanwhile the Federal Reserve is poised to shrink their balance sheet while inflation is subdued.

Two items that are currently occupying media headlines (aside from Trump) and benefit the U.S. consumer include The Amazon Effect and stubbornly low oil prices. While seemingly disparate topics, both are interconnected and provide strong tailwinds for the U.S. consumer in a variety of ways.

The Federal Reserve released the minutes from their most recent meeting this week. In it was an answer to a question that has lingered over the market for some time – what to do with the $4.5 trillion of securities residing on their balance sheet after years of expansive monetary policy.

In recent years, at our internal research meetings, we have discussed when the US economy would experience the later innings of the business cycle, and whether we would see the classic signposts that denoted the end of prior cycles. Our concern was that the longest running experiment in monetary policy would extend the low growth economy indefinitely, never getting too hot or too cold, but overshadowed by a consumer or business cycle that never really got going.

While there are many things going on around the world (the Dutch election in which the Euro-skeptic party won fewer than expected seats, the dovish read on the Federal Reserve after the expected rate hike, the no-action from the central banks in England, Japan, and Norway, etc), it is time for a little break.